- Following the interim budget that was proposed for functioning of the govt during and immediately after the elections, the first budget to be presented by the new govt has already garnered much excitement.
- Two events which will have considerable effect on the budget is the release of official growth statistics for 2013-14, and the RBI’s policy review.
- According to the data released, economic growth at 4.7% has fallen behind its advance estimate of 4.9% and fallen short of 5% for the 2nd year in a row after a promising growth rate of 8.1% in 2010-11.
- The NDA govt has already taken steps to revive important sectors such as manufacturing, besides boosting infrastructure. The growth rate is therefore expected to better.
- A collaborative approach may be adopted by the RBI and the govt to complement the monetary and fiscal policy.
- RBI’s in its policy review slashed the Statutory Liquidity Ratio (SLR) to 22.5% to increase the lending capacity of banks, especially to infrastructure, and also promised to ease money if inflation moves downwards.
- Yet, since banks prefer buying SLR securities to commercial lending, banks’ investments in SLR securities stand at 29%.
- Economic revival, improved governance and a huge leap in credit disbursement by less inhibited banks is vital for the realisation of this goal.
- RBI’s optimistic growth estimate of a 5-6% is largely dependent on the new govt and its budget.
- Read at: http://www.thehindu.com/todays-paper/tp-sports/messages-for-the-budget/article6096041.ece